How to buy oil on the stock exchange? How do they trade on the oil exchange?

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Crude oil is the most traded commodity in the world. Contracts for the supply of oil are concluded at the largest stock exchanges: London, New York and Singapore. Contracts are traded in different parts of the world. The extracted fuel differs significantly depending on the quality, which forms a significant run-up in price. The cost of petroleum products is set taking into account their density, based on the presence of paraffin additives in the fuel composition. A large demand for raw materials automatically initiates the emergence of a question in many people about how to buy oil on the exchange. Everything is not as complicated as it may initially seem to a simple person.

Oil trading: accessible in every corner of the world

Everyone who thinks about how to buy oil on the stock exchange will be pleasantly surprised that there is nothing difficult in acquiring raw materials for a modern person. Asset trading can be carried out from anywhere in the world via the Internet. Earnings on the difference in prices when reselling the most common fuel in the world is quite real. Oil exchange, previously closed to ordinary peoplepeople, is now available through the intermediary services of a broker. There is an opportunity to invest in the purchase of 1000, 100 and even 10 barrels of oil. Profit can be withdrawn both from an increase in the price of an oil product, and from its decrease.

Futures trading

Purchase of oil on the stock exchange can be carried out through the purchase of futures contracts. Each participant of the currency market has access to them, who has a special terminal installed on their PC. In fact, the futures is a contract for the supply of fuel in the next month in the amount of 1000 barrels. In accordance with the terms of the agreement, the buyer assumes the obligation to pay and accept the goods, the seller's obligation is to deliver the goods to the previously agreed place. Traders buy futures at the same price with a focus on rising fuel prices. Until the expiration of the contract, that is, until the period when the actual raw materials come to be delivered to the agreed place, the futures are sold on the secondary market. The contracts themselves are sold on the stock exchange, and their value is formed based on the situation on the international market. There are two options for the development of events: the trader either earns or loses part of the funds by selling the contract cheaper, since he is not interested in the actual delivery of raw materials.

Oil trading: clear benefits

One barrel, a raw material volume unit, corresponds to 42 gallons or 158.988 liters. Oil on the exchange is bought in barrels. This measure is also actively used to measure otherliquids. Within the framework of the exchange, oil products are traded through the purchase or sale of lots. One lot corresponds to a volume of 100 barrels. Compared to real trading in raw materials, its virtual format is simpler and more accessible, it provides for a minimum amount of costs and difficulties. In reality, carrying out oil transactions will require not only a large amount of funds, but also a warehouse, transport for the delivery of raw materials. Finding a buyer will be no less difficult.

What do you need to start trading?

Before you buy oil on the exchange, you first need to open a special trading account with a company that will provide access to the exchange. After registration, you can immediately start buying or selling raw materials. If you have no experience in this matter, you can try your hand at a special demo account, where trading is carried out without investing real money.

Available trading formats

There are only a few commodity trading formats:

• Oil trading on the stock exchange.
• Purchase or sale of raw materials under a contract that can only be entered into on the over-the-counter market.
• Trading under a long-term contract between a fuel producer and its first buyer.
• Trading based on the futures contracts mentioned above.

The stock market has its own clearly defined rules. For example, one fuel trading contract has a standard volume and corresponds to 1000 barrels. As part of the OTCmarket, the purchase and sale of raw materials can be carried out in any volume. It's more convenient and accessible. The exchange market is characterized by a specific location, which makes it inaccessible to most. Access to the OTC market through a broker is almost always open.

What currency is trading in?

You can only buy oil on the exchange for dollars, and this situation has a completely logical explanation. In fact, raw materials themselves have long been perceived as a currency, and every world currency is pegged to the US dollar. This explains the change in the cost of fuel when the exchange rate of the American currency changes. For every world-class company, it is dollars that occupy a priority place. It is worth mentioning the presence of minimum commissions for conversion, which is very convenient and profitable for large volumes of transactions. Trading oil has a certain similarity with trading currency pairs, as its value is affected by similar factors: weather events, political and economic events of world rank.

Step by step action plan

Selling or buying oil on the stock exchange is not difficult at all. The whole process can be reduced to a few steps. Initially, you need to choose a reliable broker with an impeccable reputation. The advantage should be given to those companies that charge minimal commissions for transactions and offer small spreads. Trading in raw materials can be carried out on the Forex currency market, the main thing is to check with the broker in advance the availability of such an opportunity. The trading instrument is quite often present in the list of basic quotes in the standard Metatrader terminal. You should look for it in the "futures" section. Oil may be referred to as UKOIL or USOIL, but there are brokers who use other quotes. After the required instrument is found, you need to add a new chart to the terminal window. This is exactly the base on which the trade will be conducted. If almost everyone can figure out the technical part of the question of how to buy oil on the exchange, far from all beginners in this field can correctly predict the future price movement. Despite the apparent simplicity, it is important to consider that exchange trading is not only the most difficult, but also a high-risk format for making money.

Who provides access to the exchange and on the basis of what it is worth making predictions?

The oil exchange can be opened to everyone thanks to the support of brokerage companies. Among numerous firms, the service is available to clients of Instaforex and RoboForex, Forex4you and Alpari, and some others. When determining the direction of oil price movement and getting ready to enter the market, it is worth knowing that the value of an asset is formed based on the ratio of supply and demand. The closed access to this information forces traders to pay attention to the following factors:

• Changes in stocks of fuel, both industrial and strategic. An increase in the indicator indicates low demand in the future, and a sharp decrease in it indicates a likely shortage of fuel inrun.
• Political strife in the "oil regions". In Iran, Iraq, Libya, Afghanistan, hostilities often take place, which in one way or another affect the volume of fuel production, and, consequently, the volume of its supply on the market.
• Forecasts in the development of the economy. During the 2008 global crisis, the oil market collapsed and became unattractive for trade. A similar situation could be observed at the end of 2014.

Comparing the facts, you can not only give a reliable forecast of further developments, you can get a substantial income based on it. It is better to use both fundamental analysis and technical analysis in trading. This will reduce the possibility of making mistakes.